Loblaws takes stand on whistleblowers

A footnote in plans to beef up enforcement of Canada’s securities laws has caught the attention of the country’s biggest grocer.

Loblaw Cos. Ltd. and parent company George Weston Ltd. are urging the Ontario Securities Commission to “tread carefully” before implementing a program that would offer to pay a “bounty” to whistleblowers reporting on suspected misconduct at a company.

“Offering financial rewards may produce undesirable and even perverse consequences including the proliferation of frivolous claims or the condoning of undesirable conduct by certain employees so that others may blow the whistle,” the grocery chain’s senior vice-president and general counsel Robert A. Balcom wrote in a two-page letter to the OSC.

Canada’s largest capital markets regulator is considering adopting several new enforcement tools including offering immunity and no-contest settlements that do not require an admission of guilt or wrongdoing. The OSC said in October that it had considered a whisteblower program but determined such an initiative would require more study.

The grocery store chain’s main beef seems to be that a reward-based whistleblower program operated by a securities regulator could circumvent a company’s own internal procedures.

Companies “whose compliance processes are displaced through this process will … be delayed, or at worst denied, an opportunity to self-police, which we believe is an important component of creating a culture of compliance,” Mr. Balcom said in his letter to the OSC.

Should the regulator adopt an incentive-based whisteblower program, the executive suggests requiring that suspected misconduct is also reported to the company, or reducing the potential financial reward if the whistleblower chooses to “bypass” the company’s internal procedures.